China’s Plan Nord

Quebec needs to add value with its northern development strategy

By
René Dufour

Interest in Quebec’s northern resources began many years ago. Former Premier Jean Charest should have credited work done at the Université du Québec à
Chicoutimi (UQAC) as being the precursor of his Plan Nord. In 1970, the university hosted a symposium with the theme “Le Nord québécois – Un potentiel
générateur d’emplois” (Quebec’s North Country – A Potential for Job Creation).

Charest’s Plan Nord: more than a marketing slogan?

Miners were active in the province well before the appearance of this new plan. They came, and continue to come, because of the potential for financial
gain from extraction of mining resources and because the economic conditions in Quebec are favourable. Still, mining companies have been happy to mention
their association with Charest’s Plan Nord, which has offered to bear the costs of certain infrastructures they would normally have to cover themselves.
One example is the announcement of a $200 million contribution, paid for by Quebec’s taxpayers, to northern towns such as Fermont, Chibougamau, Sept-Îles
and Port Cartier, which are often asked to provide costly services to the mining companies.

Many of the companies that stand to benefit are not from Quebec, or even Canada, but China and India. Iron and nickel in Quebec are of specific interest to
Chinese companies. Soon, there will not be as much as a tonne of these two strategic metals held by a Quebec company. Quebecers have been vocal that the
production of iron concentrates and pellets, such as is done now, does not do as much as possible to bring value into the province. They are quite right to
be hesitant about seeing their mineral resources shipped to China without having undergone any real value-adding process.

Opinions vary on the future of commodity prices, but if the price of iron concentrates were to drop to $80 per tonne, some projects underway in Quebec
would at best be delayed. It is China’s insatiable appetite that is keeping metal prices at the high levels we are currently experiencing. And just this
past September, prices dropped to $90/t. A prudent approach to Chinese investment is therefore appropriate.

At this time, the major suppliers of iron ore to China are Brazil and Australia, two countries that produce ore containing 65 per cent to 68 per cent iron.
This ore can be shipped directly to China, unlike deposits in the Labrador Trough, which contain just 28 per cent to 32 per cent iron, thus requiring
concentration before shipping. Consequently, Chinese interest in Quebec appears to be centred on their desire to diversify their sourcing, as Brazil and
Australia continue to increase their production.

Jobs in Quebec

Most high-paying jobs in metals production are in the value-adding stages, and this includes steel milling. The lack thereof in Quebec is of significant
concern.

Furthermore, even if all else goes well in the planning stages, mines that produce concentrates cannot begin operations unless an agreement is reached with
a mill for the sale of their product. As a result, jobs at iron ore concentrate projects in Quebec are beholden to steel mills overseas.

To solve this problem, I propose establishing a $25-million fund to develop technology to produce pig iron ingots, as is done with aluminum. Met-Chem, a
Quebec-based engineering company, has prepared a conceptual study for this purpose. Brazilian firm Vale, the world’s largest iron producer, is already at
an advanced stage with a similar project, and is making plans to reduce steelmaking costs by 30 per cent. It has been reported that a metallurgical
research centre run by ArcelorMittal in France is also working on developing similar technology.